There is a growing concern about the high cost of Lng Malaysia. The price of oil is a key factor in the cost of living of Malaysia. As the country relies heavily on petroleum products and crude oil exports, the high cost of petroleum products and crude oil imports is felt by the Malaysian market every day. The high price of Lng gas in particular is affecting the domestic transport sector. Many small and medium scale businesses are losing opportunities to tap into the Lng gas market as prices are soaring up because of the oversupply of this commodity lately.
The increasing cost of Lng gas is having a negative impact on the competitiveness of the national energy industry. Domestic gas demand will deplete over time due to the rising cost of Lng. Industry players are looking for ways to reduce the expense of production. Over the last few decades, the Government has made numerous changes to the way Lng is produced, which have helped to improve competitiveness and decrease the cost of Lng.
The Government’s attempts to promote Lng manufacturing in Malaysia have resulted in many tax incentives for domestic production of Lng. Along with tax refunds, State Governments has also offered various incentives to Lng industry as a way of promoting competition. These incentives cover research and development costs, infrastructure development costs and the price of maintaining a standard of production. Some of these rebates and incentives comprise the first point published in 2021, the expansion of the current generation tax rate and the awarding of a 20% share of the whole cost of Lng development to all stakeholders.
Given the cost of lng in Malaysian market, it is expected that the expense of lng in global market would also go up. This may result in the movement of Lng railroad cargo from Singapore to other Asian countries. If the trend continues, the expense of lng may become very high in Malaysia. In this situation, the export of Lng could turn into a very competitive edge for Malaysia in the global level.
The transport of Lng by rail freight has a number of disadvantages. First, the cost of lng is high due to the increased cost of fuel. Secondly, the risk of accidents and the likelihood of accidents is high on the railroad freight. The chances of a freight train accident are high on the open stretches of railroad track where there are little or no rail traffic and the probability of an accident is increased in areas where the population is dense.
On the other hand, the expense of air cargo to Lng Industry in Malaysia is comparatively low because of the absence of government regulation and the lack of a railroad network. Additionally, the expense of air freight can be controlled since the cost of fuel is minimal. Moreover, air freight is fast means of transporting Lng from one location to another.
Due to the absence of a railway network, the expense of transport by rail freight from and to Lng can be controlled. Air freight transport cost fluctuates from time to time according to the fuel cost as well as the destinations. Hence, the price of transportation by air cargo can be predicted rather well.
Both the methods of transportation can offer the service of receiving and sending shipments to and from Lng by air or by rail. However, the cost of transport by air cargo remains high compared to that of rail freight. It’s important to remember that when the Lng Industries feels that the expense of transport by air cargo is high, they may reduce the quantity of shipments. This would result in the loss of earnings for the Lng Industry.